KELY.A: Shares Will Benefit From Shift Toward Higher-Margin Staffing Segments

Analysts have reduced their fair value estimate for Kelly Services from $24 to approximately $17.67 following recent quarterly results and a softer outlook. They cite weaker revenue growth, narrower margins, and headwinds from the macroeconomic environment as key factors for this adjustment.

Analyst Commentary

Recent research notes highlight both opportunities and risks facing Kelly Services, as analysts reassess their price targets and outlook on the company’s performance and valuation.

• Bullish analysts believe Kelly Services shares are currently trading at a significant discount compared to other staffing companies. This presents a potential value opportunity for investors.
• The company’s ongoing strategic transformation is positioning it as a leader in specialty staffing and workforce solutions, with a particular focus on faster-growing and higher-margin segments in North America.
• Management’s proactive approach and focus on specialized segments are viewed as positive drivers that could enhance profitability and future growth.
• The longer-term investment case centers on Kelly’s ability to capture higher growth opportunities amid industry shifts. This could support share price recovery if execution continues to improve.

• Bearish analysts cite recent misses on quarterly results and a notably soft outlook for the upcoming quarter as reasons for caution.
• Ongoing macroeconomic pressures have negatively impacted performance and add uncertainty to near-term revenue and margin trends.
• Lowered price targets reflect tempered expectations for execution and growth, as well as concerns over the company’s ability to quickly adapt to external headwinds.
• Weaker revenue growth and narrower margins remain significant risks to the investment thesis and could continue to weigh on valuation.

What's in the News

• Kelly Services released earnings guidance for the fourth quarter of 2025, projecting a total year-over-year revenue decline of 12% to 14% primarily due to reduced demand from federal contractors and some large clients (Key Developments).
• The underlying revenue decline, adjusting for these unique impacts, is expected to be 4% to 6%, which reflects a slightly worsened outlook compared to the third quarter (Key Developments).
• The outlook also considers a modest impact from the recent government shutdown, which is contributing to the overall revenue headwinds (Key Developments).

Valuation Changes

• Fair Value Estimate: Lowered from $24 to approximately $17.67. This reduction reflects revised outlooks and earnings performance.
• Discount Rate: Increased slightly from 8.11% to 8.26%. This change indicates a marginally higher risk premium applied in valuations.
• Revenue Growth: Dropped significantly from 0.64% to -0.38%. This shift into negative territory points to expected revenue contraction.
• Net Profit Margin: Decreased sharply from 11.54% to 3.71%. This highlights concerns over profitability and operational efficiency.
• Future P/E Ratio: Risen from 2.00x to 5.01x. This change suggests a higher valuation relative to future earnings despite weaker profit expectations.